Six German Retail Properties - the Louis Group International ...

The purchase of
Six German Retail Properties
Private Placement Memorandum
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table of contents
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Preamble...........................................................................................1
Key Features......................................................................................2
The German Property Market ...............................................................3
The German Retail Property Market......................................................4
Covenant Details ................................................................................5
Berlin................................................................................................7
Braunfels...........................................................................................8
Ellwangen..........................................................................................9
Lorrach ...........................................................................................10
Radolfzel .........................................................................................11
Stockach .........................................................................................12
Rental Schedule...............................................................................13
Finances .........................................................................................14
Bank Finance...................................................................................15
Taxation Issues.................................................................................16
Investment Projections......................................................................17
Investment Advantages .....................................................................18
Investment Risks..............................................................................19
Investment Structure ........................................................................20
Administrative Issues........................................................................21
Disclaimer .......................................................................................22
Private Placement Memorandum Six German Retail Properties

preamble
properties germany
Louis Group Property Associations (LGPA) commenced in South Africa in 1968 and is today South Africa's largest
and longest serving private property syndication enterprise. LGPA currently operates in England, Germany, Isle of Man,
Namibia, South Africa, Zimbabwe and Switzerland and can expose clients to properties in multiple currencies.
LGPA is delighted to release this diversified investment opportunity which entails an investment in 6 retail German
properties in Berlin, Braunfels, Ellwangen, Lorrach, Radolfzell and Stockach.
In 2005, some € 20.55 billion was invested in German commercial property. The bulk of investment was seen outside
the traditional property centres and came in the form of individual transactions and larger nationwide portfolios. Also
during this period, Germany attracted 9.4% (2nd most) of all shopping centre investment in Europe, with the result
that in 2006 Germany had 12,4 million m 2 €
of shopping centre floorspace - the 3rd most in Europe.
These 6 retail properties embody all the criteria for a great investment opportunity, namely the properties are (i) well
located, (ii) fully let on long leases, (iii) let to very strong covenants and (iv) tenants are well-established national
brands.
It needs to be noted at the outset that although terms have been agreed with the various sellers and legals completed,
all the acquisitions are subject to suspensive provisions inserted for the benefit of the purchaser, which if not fulfilled,
could entitle the purchaser to rescind from the contract. Although we do not foresee problems, in the event that the
purchaser should withdraw from any one or more property purchases, then a pro-rata amount of the investment
proceeds plus accumulated interest will be returned to investors.
This memorandum is for the use of the persons to whom it is addressed and the recipients of this memorandum agree that all of the information
contained herein is of a confidential nature. This memorandum must not be copied, reproduced, distributed or passed to others at any time without
the prior written consent of Louis Group.
Private Placement Memorandum Six German Retail Properties
1

key features
properties germany
Preamble: This venture is an investment opportunity in 6 multi-let retail properties well located in 6 key
German towns/cities. The properties are all let to very strong covenants who are well-established
national brands.
Location Tenant Lease Expiry Annual Rent Rent Esc.
Berlin Plus 30/10/2022 € 221,125 60% of CPI
Braunfels Edeka 30/06/2013 € 156,455 50% of CPI
Ellwangen Rewe 08/11/2021 € 330,000 60% of CPI
Lorrach DM-Vermog
HD-Schuhe
31/03/2019
31/12/2016
€ 126,000
€ 82,800
60% of CPI
60% of CPI
KiK Textilien 31/03/2019 € 82,800 65% of CPI
Mr D. Isbilir 31/07/2008 € 12,000 60% of CPI
Radolfzell Takko 30/09/2012 € 99,990 67% of CPI
Lidl 31/12/2011 € 147,395 60% of CPI
HD-Schuhe 29/09/2016 €€ 58,959 60% of CPI
Fristo 31/05/2011 € 48,777 60% of CPI
Schwarz-Aubenwerbung € 1,020 Not applicable
Stockach Edeka 30/06/2016 € 393,845 50% of CPI
Aach Sulger 30/06/2016 € 40,014 50% of CPI
Expenses: Landlord is liable for property insurances, rates and external repairs.
Gross Rental: € 1,804,805
Total Expenses: € 120,600 (Estimated)
Net Rental: € 1,684,205 (Estimated)
Capitalization Value: € 22,970,000 (Property Costs)
€ 1,200,000 (Berlin Development Costs)
€ 2,530,000 (Acquisition Costs)
€ 600,000 (Cash Reserve)
€ 27,300,000 (Approx. Total)
Bank Finance: €19,400,000
Bank Leverage on Property Costs: 80% Bank Leverage on Total Costs: 73%
Finance Terms: Debt & Interest to be repaid over a 20 year amortization schedule. Interest rate @ 3 month
Euribor plus 1% banker's margin plus cost of hedging instrument.
Invest Company: Louis Group InvestCo Pink Ltd
Managing Agent: Louis Group (IOM) Ltd
Required Equity: €7,900,000
Available Shares: 790 @ €10,000 per share
Investment Commencement: Investors to pay no later than 1 April 2007
Projected Return: In excess of 10% in Euros compounded per annum
Risk Profile: Low
Comparison: In excess of 5x current German inflation or 3x Euro bank deposit rate.
Private Placement Memorandum Six German Retail Properties
2

the german property market
Activity in the German commercial property market has
recently been dominated by foreign investors. The basis
for this foreign investment has been the low cost of
finance, the relatively attractive yields compared with
other European property markets and the improved macroeconomic
conditions in Germany.
In 2005, some € 20.55 billion was invested in German
commercial property. The bulk of investment was seen
outside the traditional property centres and came in the
form of individual transactions and larger nationwide
portfolios.
In the light of signs which suggest that lettings markets
are recovering, the transaction volume in the major office
centres of Berlin, Dusseldorf, Frankfurt, Hamburg and
Munich have enjoyed a positive trend throughout. The
investment volume of € 20.55 billion represented a 33%
advance on the previous year's result.
Demand for commercial property is likely to remain high
throughout 2007. Demand from foreign investors will
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continue to be strong for as long as the interest-rate
differential provides scope for arbitrage deals.
Financing is initiated to a growing extent by foreign
institutions which have come to look at the German market
as being more lucrative. In this context the value of
property will depend to a much larger extent on the cash
flow and the underlying financial engineering. In future,
the location of a property will no longer be the sole
deciding factor for an investment.
While residential property prices in much of Europe have
surged in recent years, the German residential market
has been relatively unaffected. Office rentals in Germany
have also lagged and the retail market is comparatively
under-supplied in terms of space.
The comparatively sluggish performance of recent years,
coupled with the very attractive financing opportunities
would suggest that significant capital uplift is imminent.
Private Placement Memorandum Six German Retail Properties
3

the german retail property market
With a 2005 retail spend of €333 billion (of Europe's
€2,300 billion), Germany is the 3rd largest retail market
in Europe behind France and the UK. Yet, on a per capita
basis it ranks only 14th, whereas France and the UK are
tied at 6th.
Retail sales growth over the period 1995 - 2005 was a
mere 2%, significantly behind France and the UK at 35%
and 52% respectively. Although forecast retail sales
growth for the next decade (2006-2017) is better at 6%,
it is still far behind the expectations for France at 27%
and the UK at 31%.
German consumers, although among the most well-off in
Europe, are extremely price sensitive. Price is consistently
placed above considerations such as quality, choice and
service, and the concept of "value-added" is almost nonexistent.
This gives little incentive to retailers to improve
their offerings or be innovative in their retail practices.
Lacking the vibrancy of a consumer driven market (such
as France or the UK), many of Germany's larger retailers
are forced to look to broader European markets for growth.
Consequently, of all European retailers, German businesses
are among the most international (accounting for 25%
of European cross-border sales) with significant market
share in most countries.
Somewhat paradoxically, however, Germany attracted
3.6% (7th most) of all shopping centre investment in
Europe in 2004, and 9.4% (2nd most behind the UK)
in 2005, with the result that (in 2006) Germany had
12,4 million m 2 of shopping centre floorspace - the 3rd
most in Europe.
There is undoubtedly enormous international interest in
German retail property, which may be for 3 main reasons:
• Under-Supply - Although shopping centre space has
doubled in the last 10 years, Germany still offers only
140m2 of shopping centre space per 1,000
inhabitants. In contrast to more than 200m 2 in Spain
and France, and around 300m 2 in the Netherlands
and Sweden, Germany appears to have some catching
up to do.
properties germany
• Yield Gap - Financial investors are attracted by the
favourable interest rate environment. The comparatively
high property yields contrast with relatively low
financing rates, create an attractive opportunity for
highly leveraged investors. The interest rate spread
between rental yields and long-term financing rates
is favourably high in comparison to other European
countries.
• Economic Revival - Statisticians talk of the mean
reversion concept. What this implies is simply that
a market will not be able to deviate permanently from
its trend growth rate. Retail trade has been depressed
in Germany for some time and there is an expectation
that "what goes down must come up."
Private Placement Memorandum Six German Retail Properties
4

convenant details
Dm-Drogerie Mark
The first dm-drogerie markt (chemist store) was founded
in 1973 in Karlsruhe. Just 5 years later there were
already over 100 stores in Germany and Austria. The past
2 years have seen sales growth of 8.6% and 11.7%
respectively, with 2005 turnover reaching €3,7 billion.
With stores in Germany (900), Austria (where they have
a 40% market share and operate over 350 stores), the
Czech Republic, Hungary, Croatia, Slovakia, Slovenia,
Serbia and Bosnia, today the dm-group trades from nearly
2,000 stores across Europe employing 25,000 people.
Edeka
The Edeka Group is the largest German supermarket
corporation, currently holding a market share of 26%.
Founded in 1898, it now consists of several co-operatives
of independent supermarkets all operating under the
umbrella organisation Edeka Zentrale AG & Co KG,
headquartered in Hamburg.
Ranging from small corner stores to hypermarts, there
are approximately 11,000 stores with the Edeka name,
employing about 250,000 people. Showing 22% sales
growth over the period 2001-2005, Edeka generated
turnover of €38 billion for the 2005 financial year.
Fristo
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Founded in 1970 in Nuremberg, Fristo is a private
company operating retail beverage stores across 9 German
states as well as in Austria with over 300 stores and an
annual turnover of €150 million.
Fristo continues to invest heavily in distribution and
logistics technology to both reduce the costs of transport
and storage, and ensure consistently high levels of product
availability. This focus on customer convenience and
competitive pricing keeps Fristo at the forefront of its
market.
Heinrich Deichmann-Schuhe
The Heinrich Deichmann-Schuhe GmbH & Co. KG is a
German company established in 1913 that manufactures
shoes and sports wear. With over 1,000 outlets in Germany
alone, Deichmann operates a further 1,100 retail stores
in Austria, Poland, Hungary, Great Britain, the Netherlands,
Switzerland, the USA, the Czech Republic, Turkey,
Denmark, Slovakia, Slovenia, Croatia, Sweden and
Romania.
Although the Institut fur Handelsforschung (Trade Research
Institute) reports that shoe retailing was down by 0.2%
in Germany for 2006, Deichmann increased turnover by
over 7%, selling 65 million pairs of shoes for €1.26
billion. Across all markets, turnover was up 10.5% to
€2.71 billion in 2006.
KiK Textil-Diskont
KiK forms part of the Tengelmann Group - a 140 year old
business founded by the Schmitz-Scholl family in M?lheim
an der Ruhr in 1867. As of 2005, the Group employed
185,000 people at over 7,500 branches in 15 countries,
and generated sales totaling€€26.3 billion.
From its beginnings in the early 1990's, KiK has already
expanded its branch network to just short of 2,000
branches, employing 13,000 people. In 2005, footfall
increased 27% and sales were up 22% over the 2004
figures to €995 million. With a strong focus on developing
a positive brand image, preparations for expansion to
3,000 stores are in progress.
Private Placement Memorandum Six German Retail Properties
5

convenant details
Lidl
Lidl is a discount supermarket chain of German origin
that operates 5,000 stores across 17 European countries
with an annual turnover of circa $46 billion.
A member of the Schwarz group of companies, which
also owns the store chains Handelshof and Kaufland, the
first Lidl store of was opened in 1973. Lidl is Germany's
second largest discount supermarket chain, Aldi being
the largest.
Plus Retail
Plus, which is part of the Tengelmann Group, operates
approx. 2,800 stores in Germany alone, with a further
1,000 across Austria, Spain, Portugal, Hungary, Poland
and the Czech Republic. Although 28% of the company's
€8.6 billion in sales are already generated outside of
Germany, the focus on European expansion will continue
with Romania and Greece the immediate objectives.
The market leader in the food discount sector in Hungary,
Plus was also singled out by consumer organizations in
Spain and Portugal as the lowest-cost food retailer.
Furthermore, Plus Online Shop has become one of the
top ten German internet mail order retailers.
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Rewe
Rewe was founded in Cologne in 1927 when 17 purchasing
co-operatives joined forces, and now, 80 successful years
later, the Rewe Group's operations cover food retailing,
travel and tourism, DIY stores, gardening stores, specialist
consumer electronics stores and even drugstores.
At the conclusion of the 2005 financial year, the group
operated 12,000 stores in 14 European countries,
employing 260,000 people and generating a net turnover
of €41.7 billion, making Rewe the 3rd largest retailing
group in Europe and the 9th largest in the world.
Takko
One of the largest fashion discounters in Germany, Takko
passes on the benefits of its huge purchase volumes to
its customers in the form of lower prices. Founded in
1982 by the Hettlage Group, a majority shareholding was
purchased by the Tengelmann Group in 1990. In 1999
the business underwent a management buy out, at which
time it was renamed Takko ModeMarkt GmbH & Co. KG.
With currently 1,000 branches, Takko plans to openg a
further 100 branches per year. Takko currently operates
in Germany, Austria, the Netherlands, Hungary and the
Czech Republic.
Private Placement Memorandum Six German Retail Properties
6

erlin
Landlord: Louis Group Properties GR15 Ltd
City: Berlin
Street: Buckower Damm 106 - 110
Postcode: 12349
Location:
Berlin is the capital city of the Federal Republic of
Germany. With a population of 3.4 million, it is Germany's
largest city, and the second most populous city in the
European Union. Berlin is one of the most influential
centers in European politics, culture and science, and
serves as an important hub of continental transportation.
Following the reunification in 1990, the city regained
its status as the capital of all Germany.
Lettable Area: €1,010m 2
Purchase Price: 3,050,000 (excluding acquisition costs)
Rental Schedule: Refer to enclosed Rental Schedule.
Annual Gross Rental: €221,125 (plus VAT)
Approx. Annual Expenses: €15,500 (Estimated)
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Approx. Annual Net Rental: €205,625 (Estimated)
Net Initial Yield: 6.7%
Important Lease Provisions:
• Rent reviews are all upward only.
• The tenant bears the cost of their own utilities
consumption, as well as cleaning and maintenance
of all interiors, the winter services and maintenance
of installations such as heating and ventilation.
• The Landlord is responsible for insurance, property
rates and structural maintenance.
Notes:
• This is a development site and construction is due to
commence on or about 1 April 2007 and should take
approximately 7 months to complete.
• A lease agreement with the Tenant for a period of 15
years has already been
concluded.
• The acquisition of this property is subject to the
fulfillment of certain suspensive conditions in favour
of the Purchaser. In the event that these conditions
are not fulfilled the Purchaser may elect to withdraw
from the acquisition.
Private Placement Memorandum Six German Retail Properties 7

aunfels
Landlord: Louis Group Properties GR12 Ltd
Town: Braunfels
Street: Wetzlaer Str. 16
Postcode: 35619
Location:
Braunfels is a town of 11,500 inhabitants in the charming
valley of Lahn, in the Lahn-Dill-Kreis district in Hesse.
First named in the 12th century, Braunfels received its
town charter in 1607. With festivals running throughout
the year, and a state-approved climatic spa, Braunfels is
a family friendly holiday town.
Lettable Area: 1,444m 2
Purchase Price: €2,057,387 (excluding acquisition costs)
Rental Schedule: Refer to enclosed Rental Schedule.
Annual Gross Rental: €156,455 (plus VAT)
Approx. Annual Expenses: €10,500 (Estimated)
Approx. Annual Net Rental: €145,955 (Estimated)
Net Initial Yield: 7.1%
Important Lease Provisions:
• Rent reviews are all upward only.
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• The tenant bears the cost of their own utilities
consumption, as well as cleaning and maintenance
of all interiors, the winter services and maintenance
of installations such as heating and ventilation.
• The Landlord is responsible for insurance, property
rates and structural maintenance.
Notes:
• The acquisition of this property is subject to the
fulfillment of certain suspensive conditions in favour
of the Purchaser. In the event that these conditions
are not fulfilled the Purchaser may elect to withdraw
from the acquisition.
Private Placement Memorandum Six German Retail Properties
8

ellwangen
Landlord: Louis Group Properties Pink Ltd
Town: Ellwangen
Street: An der Jagt 42
Postcode: 73479
Location:
Ellwangen an der Jagst is a town of 25,000 inhabitants
in the district of Ostalbkreis in the east of Baden-
Württemberg in Germany. First settled in the 7th century,
the town is situated in the valley of the river Jagst, between
the foothills of Swabian Alb and and Swabian-Franconian
Forest. 1300 years later the combination of the town's
rich architecture, ancient cultural events, fascinating
history and natural beauty make Ellwangen a popular
holiday destination.
Lettable Area: 2,200m 2
Purchase Price: €4,600,000 (excluding acquisition costs)
Rental Schedule: Refer to enclosed Rental Schedule.
Annual Gross Rental: €330,000 (plus VAT)
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Approx. Annual Expenses: €19,500 (Estimated)
Approx. Annual Net Rental: €310,500 (Estimated)
Net Initial Yield: 6.8%
Important Lease Provisions:
• Rent reviews are all upward only.
• The tenant bears the cost of their own utilities
consumption, as well as cleaning and maintenance
of all interiors, the winter services and maintenance
of installations such as heating and ventilation.
• The Landlord is responsible for insurance, property
rates and structural maintenance.
Notes:
• The acquisition of this property is subject to the
fulfillment of certain suspensive conditions in favour
of the Purchaser. In the event that these conditions
are not fulfilled the Purchaser may elect to withdraw
from the acquisition.
Private Placement Memorandum Six German Retail Properties
9

lorrach
Landlord: Louis Group Properties GR12 Ltd
City: Lörrach
Street: Bärenfelser Str. 4
Postcode: 79539
Location:
Lörrach is a city of over 47,000 inhabitants in southwest
Germany, in the valley of the Wiese, close to the French
and Swiss borders. It is the capital of the district Lörrach
in Baden-Württemberg. The biggest industry is the
chocolate factory Milka. Lörrach received market rights
in 1403, but did not obtain the privileges of a city until
1682. Lörrach was officially the capital of Germany for
one day - the 21st of September 1848 - during the
Revolutions of 1848/9.
Lettable Area: 2,435m 2
Purchase Price: €4,072,818 (excluding acquisition costs)
Rental Schedule: Refer to enclosed Rental Schedule.
Annual Gross Rental: €303,600 (plus VAT)
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Approx. Annual Expenses: €21,500 (Estimated)
Approx. Annual Net Rental: €282,100 (Estimated)
Net Initial Yield: 6.9%
Important Lease Provisions:
• Rent reviews are all upward only.
• The tenant bears the cost of their own utilities
consumption, as well as cleaning and maintenance
of all interiors, the winter services and maintenance
of installations such as heating and ventilation.
• The Landlord is responsible for insurance, property
rates and structural maintenance.
• Heinrich Deichmann Schuhe GmbH & Co KG
(representing 26% of the lettable area and 27% of
the gross annual rental) are responsible for any
increases in land taxes and insurance.
Notes:
• The acquisition of this property is subject to the
fulfillment of certain suspensive conditions in favour
of the Purchaser. In the event that these conditions
are not fulfilled the Purchaser may elect to withdraw
from the acquisition.
Private Placement Memorandum Six German Retail Properties
10

adolfzell
Landlord: Louis Group Properties GR12 Ltd
Town: Rädolfzell
Street: Böhringer Str. 79
Postcode: 78315
Location:
Radolfzell am Bodensee is a town of over 30,000
inhabitants at the western end of Lake Constance. It is
the third largest town in the district of Konstanz, in Baden-
Württemberg. Radolfzell is a well known health care city
and a very important railroad junction. The city was
founded in 826 and was dedicated to Jesus Christ by
Bishop Radolf of Verona, from whom the town took its
name. In 1990 Radolfzell was named the Federal
Environment Capital City of Germany.
Lettable Area: 2,442m 2
Purchase Price: €4,683,258 (excluding acquisition costs)
Rental Schedule: Refer to enclosed Rental Schedule.
Annual Gross Rental: €356,141 (plus VAT)
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Approx. Annual Expenses: €23,600 (Estimated)
Approx. Annual Net Rental: €332,541 (Estimated)
Net Yield: 7.1% (Based on above estimates)
Important Lease Provisions:
• Rent reviews are all upward only.
• Negotiations are underway with Lidl GmbH & Co KG
(representing 31% of lettable area and 41% of gross
annual rental) to enlarge their trading area and sign
a new 10 year lease.
• The tenant bears the cost of their own utilities
consumption, as well as cleaning and maintenance
of all interiors, the winter services and maintenance
of installations such as heating and ventilation.
• The Landlord is responsible for insurance, property
rates and structural maintenance.
Notes:
• The acquisition of this property is subject to the
fulfillment of certain suspensive conditions in favour
of the Purchaser. In the event that these conditions
are not fulfilled the Purchaser may elect to withdraw
from the acquisition.
Private Placement Memorandum Six German Retail Properties
11

stockach
Landlord: Louis Group Properties GR11 Ltd
City: Stockach
Street: Bahnhof Str. 10
Postcode: 78333
Location:
Stockach is a town of 16,500 inhabitants less than 15km
north of Radolfzell, in the district of Konstanz, in Baden-
Württemberg. Its idyllic location encourages outdoor
pursuits, and the nearby Bodensee (5km away) offers
excellent water sports facilities. Stockach has existed
since the 8th century and was awarded a town charter
1278. Annual events such as the "Schwaebischalemannisch-carnival"
and the "Stockacher cuckoo tribunal"
present opportunities for the locals to display their townpride.
Lettable Area: 3,942m 2
Purchase Price: €5,705,243 (excluding acquisition costs)
Rental Schedule: Refer to enclosed Rental Schedule.
Annual Gross Rental: €433,859 (plus VAT)
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Approx. Annual Expenses: €30,000 (Estimated)
Approx. Annual Net Rental: €403,859 (Estimated)
Net Initial Yield: 7.1%
Important Lease Provisions:
• Rent reviews are all upward only.
• The tenant bears the cost of their own utilities
consumption, as well as cleaning and maintenance
of all interiors, the winter services and maintenance
of installations such as heating and ventilation.
• The Landlord is responsible for insurance, property
rates and structural maintenance.
Notes:
• The acquisition of this property is subject to the
fulfillment of certain suspensive conditions in favour
of the Purchaser. In the event that these conditions
are not fulfilled the Purchaser may elect to withdraw
from the acquisition.
Private Placement Memorandum Six German Retail Properties
12

ental schedule
Area Lease Lease Lease Option Annual
Property Tenant m 2
Start Period Expire Period Rent Annual Escalations
Berlin
Plus Warenhandelsgesellschaft mbH 1,010 01/11/2007 15 30/10/2022 3 x 5y € 224,750 Adjusted by 60% of change in CPI
if CPI change > 10%
Braunfels
Edeka Handelsgesellschaft Hessenring mbH Melsungen 1,444 01/07/1999 15 30/06/2013 3 x 5y € 156,455 Every 3 years, max 50% of increase
if CPI change > 10%
Ellwangen
REWE Deutsche Supermarkt KG 2,200 08/11/2006 15 08/11/2021 3 x 5y € 330,000 Fixed until 2010, thereafter every 2 years
60% of increase if CPI change > 10%
Lorrach
Dm-Vermogensverwaltungsgesellschaft mbH 1,090 01/04/2007 12 31/03/2019 3 x 3y € 126,000 Fixed until 2010, thereafter 60% of increase
if CPI change > 10%
Heinrich Deichmann-Schuhe GmbH & Co KG 640 02/01/1997 20 31/12/2016 4 x 5y € 82,800 Fixed until 2011, thereafter 60% of increase
if CPI change > 12%
KiK Textilien - und Non-Food GmbH 625 01/04/2007 12 31/03/2019 3 x 3y € 82,800 Fixed until 2011, thereafter 65% of increase
if CPI change > 10%
Mr Dursun Isbilir 80 01/08/1995 1331/07/2008 1 x 5y € 12,000 Adjusted if CPI change > 10%
2,435 € 303,600
Radolfzell
Takko Holding GmbH 778 30/09/1997 15 30/09/2012 2 x 5y € 99,990 66.6% of increase if CPI change > 10%
Lidl GmbH & Co KG 755 27/05/1999 Indefinite 31/12/2011 Indefinite € 147,395 60% of increase if CPI change > 10%
Heinrich Deichmann-Schuhe GmbH & Co KG 450 27/09/1997 19 29/09/2016 4 x 5y € 58,959 Fixed until 2010, thereafter 60% of
increase if CPI change > 10%
Fristo Getrankemarkt GmbH & Co Betriebs KG 459 01/06/1999 12 31/05/2011 2 x 5y € 48,777 60% of increase if CPI change > 10%
Schwarz-Aubenwerbung GmbH 20/01/20035 21/01/2008 n/a € 1,020 Not applicable, advertising space
2,442 € 356,141
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Stockach
Edeka Handelsgesellschaft mbH 3,250 01/07/2001 15 30/06/2016 3 x 5y € 393,845 Every 3 years, 50% of increase
if CPI change > 10%
Aachcenter Sulger & Eichwald GmbH & Co KG 692 01/07/2001 15 30/06/2016 3 x 5y € 40,014 Every 3 years, 50% of increase
if CPI change > 10%
3,942 € 433,859
Private Placement Memorandum Six German Retail Properties
13

finances
Acquisition Costs
The approximate acquisition costs are as follows:
Purchase Price - Radolfzell € €4,683,258
- Loerrach € €4,072,818
- Stockach € €5,705,243
- Braunfels € €2,057,387
- Ellwangen € €4,600,000
- Berlin € €3,050,000
Property Transfer Tax € €805,000
Louis Group Project Fee € €360,000
Third Party Agent Fee € €300,000
Equity Introducers Fee € €180,000
Valuation Fee € €85,000
Environmental Study € €50,000
Bank Finance Fee € €155,000
Tax Opinion Fee € €20,000
Attorney Fees € €250,000
Notary Fees € €120,000
Bank Legals €95,000
Company Reg. Fees € €15,000
VAT Reg. Fees € €25,000
Miscellaneous Fees € €60,000
Approx. Acquisition Fees €26,688,706
The aforementioned costs are approximates only and may vary.
The amounts exclude VAT at 19%.
Capitalization
The capitalization requirements of the company are:
Acquisition Costs 26,700,000
Float 600,000
Total €27,300,000
The company is to be capitalized as follows:
Shareholders Loans 7,900,000
Bank Finance 19,400,000
Total €27,300,000
General Fees
Louis Group (IOM) Ltd or the duly appointed nominees
of Louis Group International Holdings Ltd ("LG") have
been selected as the property managing agents and the
corporate service providers for the duration of the
investment period.
LG's fee from time to time for providing corporate services
is posted on www.lgtrustees.com
LG's project management fee is 1.50% of the property
purchase price.
LG's fee for managing the property is 5% of funds collected
in rents and other recoveries.
properties germany
LG's fee for negotiating the sale of any one or more of
the properties in the portfolio will be the greater of 2%
of the selling price or the performance fee (as detailed
below). If a performance fee is charged then no sale fee
will be levied.
LG also reserves the right to charge a fee for new leases
concluded, lease renewals or negotiating rental reviews.
These fees will not exceed the market related fees for
these services.
Performance Fees
Where the fund's annualized performance is in excess of
an established benchmark return, LG may levy an
annualised performance fee against the investor's return
(Internal Rate of Return), based on the out-performance
of the fund. The set benchmark return in this case is
10% per annum and the performance fee would be
calculated as follows:
IRR Performance fee
0 - 9.9% No fee levied
10% + 20% of the out-performance will be levied
The performance fee will be calculated over the holding
period of the investment since commencement.
In the event of out-performance, the decision to levy a
performance fee will remain at the discretion of LG.
LG may choose to waive certain fees in the event that the
property does not perform to certain levels.
In all cases these fees exclude VAT, disbursements and
third party fees.
Issued Shares
790 shares will be issued at €10,000 per share, structured
as described herein.
Private Placement Memorandum Six German Retail Properties
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ank finance
Leverage
This property investment allows for 80% bank leverage
on the property purchase prices and 73% bank leverage
on the total acquisition costs (as outlined under the
category "Finances"), without the inherent risks to the
investor. The investor is not personally liable in any manner
for the bank finance, as Louis Group International Holdings
Ltd has made suitable arrangements with the financing
institution to exclude any liability to the investor.
Leverage is the principle employed as one of the optimal
ways to make capital grow faster than the rate of inflation.
Leverage involves the utilization of bank finance in order
to help the investor increase the size of their stake in a
property, by allowing them enhanced capital growth with
the greatest after tax income. There are tax benefits and
increased capital profit that can be achieved from
incorporating leverage in a property investment.
Leveraging has inherent risks described under Investment
Risks.
Non-Recourse Loan
We will obtain a mortgage loans from Barclays Bank and
Royal Bank of Scotland for a total sum in the order of
74% of the property acquisition costs.
If Louis Group on behalf of the Investment Company is
able to secure greater leverage either now or in the future,
then the Investment Company will exercise this option
and utilize any excess funds in its discretion to redeem
shareholder loans.
The non-recourse nature of the bank loan will effectively
reduce the risks associated with the property investment
since, in the unlikely event of tenant failure and / or
collapse in commercial property values and / or any
unforeseen circumstances, the lending banks' recourse
is not to the investor but only to the property and such
other arrangements as the company has made with the
Bank and Louis Group International Holdings Ltd.
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Therefore, if the property falls in value, exposure would
be limited to the extent of the investors initial cash
investment.
Finance Interest
The terms of the bank loans are that the debt and interest
will be repaid over approximately a 20 year amortization
schedule, with a hedging instrument to the banks
satisfaction.
The interest rate applicable on the loans is the 3 month
Euribor plus a 1% banker's margin. Take note that this
rate excludes the additional costs associated with the
hedging instrument which is a requirement in terms of
the bank loans.
Generally the interest payable on the bank loans can, for
tax purposes, be offset against the rental income from
the property. Without this offset, income tax would be
payable on all of the rental income.
Private Placement Memorandum Six German Retail Properties
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taxation issues
KPMG and Schuchardt Ohmer Szpak were consulted to
provide taxation advice focusing predominantly on the
following issues:
• The appropriate acquisition structure;
• Reducing German income tax on rental income received;
• Reducing German capital gains tax on the ultimate
disposal of the properties;
• Limiting the financing to the German thin capitalization
rules.
Acquisition Structure
Two alternatives were provided as the appropriate acquisition
structure:
a. Foreign company holds German properties directly
("Isle of Man Co Structure"); or
b. Foreign company holds interests in a German (limited)
partnership which acquires and holds German real
estate ("KG Structure").
There were not severe differences in taxation for either
structure. The KG structure was found to be more complex,
expensive and susceptible to possible changes in German
tax legislation. For these reasons, the Isle of Man Co
Structure was decided upon.
Income Tax
The Isle of Man property company will be subject to
German corporate income tax currently at 26.38% (corporate
tax rate of 25% plus a solidarity surcharge of 5.5% thereon)
on net rental income arising from any German held
properties.
Foreign companies can also, in certain circumstances, be
subject to German trade tax, which vary between 14% and
20% depending on the community where the properties
are located. However, to the extent that a foreign company
does not operate a permanent establishment in Germany,
then no German trade tax will be due. The structure we
have adopted, will not (under current legislation) be liable
to German trade tax.
properties germany
Capital Gains Tax
In general, a capital gain from the disposal of German real
estate is subject to German corporate income tax currently
at 26.38%. This general rule applies to both resident and
non-resident companies.
The capital gain is calculated as the difference between
the sale proceeds and the acquisition costs
The tax deductible depreciation rate for buildings held by
foreign investors is 2% per annum if the building was built
in 1925 or later and 2.5% if the building was built before
1925.
Thin Capitalization Rules
In general, interest paid on both shareholder and bank
loans is deductible for tax purposes. For loans from a
related party, the interest rate must be in line with the
interest rate that would have been charged by a third party.
However, there is an important restriction to this general
rule. Interest on loans falling under the scope of the German
thin capitalization rules is only deductible for tax purposes
under certain circumstances. It should be noted that the
thin capitalization rules not only affect shareholder loans
but also certain bank loans.
Real Estate Transfer Tax
The Real Estate Transfer Tax (RETT) payable to German
Revenue is 3.5% of the property purchase price.
Value Added Tax
The VAT rate in Germany has in 2007 increased to 19%.
Disclaimer
The aforementioned is for general information purposes
only. It is not intended to be comprehensive or to provide
any specific tax advice.
Private Placement Memorandum Six German Retail Properties
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investment projections
Investment Strategy
The core investment strategy will be to hold the property
for at least 7 years and during this period we will continue
to negotiate refinance terms for the property to release
shareholder loans.
During the investment period, net surplus funds after
servicing bank debt, company expenses, German taxes
and providing for reserves, will be distributed to investors
in the most tax efficient manner. It is the stated objective
of the company to make income & loan repayment
distributions to the investors from available net cash
proceeds.
After the first 2 years, the company aims to annually
return in excess of 2% cash to the investor, which may
be largely increased due to loan refinancing.
Based on an assumed gradual increase in rent and positive
capital growth over the investment period, we project that
the return on investment will be in excess of 10% per
annum compounded in Euros.
As a comparison, it is noteworthy to mention that the
current bank deposit rates on Euros is circa 3.5% and
German inflation index is currently less than 2%. This
implies that the projected returns are 3 to 5 times greater
than the bank or inflation rates respectively.
Liquidity of Investment
To enjoy the expected return, which we have projected
to be in excess of 10% per annum compounded, investors
should ideally hold shares for a minimum period of 5-7
years - if held for an even longer period the growth should
be proportionately greater.
However, there is nothing withholding investors from
realizing the investment earlier. This can be effected as
follows:
• Shares are freely tradeable and investors may dispose
of their shareholding, subject to the purchaser being
bound by the conditions contained in the share
application form and the company's memorandum
and articles of association.
properties germany
• Louis Group would always endeavour to assist in selling
the shares for the investor (Louis Group's fee in this
regard will be a max. of 3.5% plus VAT of the selling
price of the shares). Although experience has shown
that it takes approximately one to three months to
sell shares, Louis Group cannot guarantee a sale within
this period.
• Indication of fair value for the shares will be made
available by Louis Group on request.
Naturally, investors would not enjoy the growth envisaged
on early disposal as investment returns grow relative to
the time period held. By way of example, if shares are
sold after being held for two years, an investor could in
all likelihood expect to achieve a return on equity of say
5% per annum compounded. However, if the same shares
were disposed of after 5 years, the return on equity should
be substantially greater - say in excess of 10% per annum
compounded.
Private Placement Memorandum Six German Retail Properties
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investment advantages
There are many advantages to this investment, which
must be read in conjunction with the investment risks:
Tenant & Portfolio Status
This is truly a rare investment opportunity because it is
very difficult to assemble a good portfolio of well located
German retail properties. In addition, the properties are
fully let on long leases to national brands. These retail
properties are scarce commodities, especially considering
the high international demand for quality German
commercial properties.
Purchase at Cost
The properties were purchased at attractive yields which
makes the potential future capital value of the properties
particularly attractive.
Profitable Spread
The Cost of Debt on this venture is likely to be around
5% (inclusive of an appropriate hedging instrument).
The Net Initial Yield for the first year should be around
6.3% (before leverage any gearing into account). This
implies a spread of circa 1.3%, which will grow as rentals
within the portfolio escalate. Even if the property was
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leveraged at 100% and no equity was introduced, an
income profit on the venture would still be achieved from
year one. This situation is both uncommon and profitable.
Additional Funding
Based on the agreed rental uplifts, an additional nonrecourse
bank loan could be secured in the future,
providing the company with a cash lump sum for
distribution.
Non-Recourse Lending
This property investment allows for bank leverage without
the inherent risks to the investor. The investor is not
personally liable in any manner for the bank finance.
Tax Advantages
Based on current German tax legislation, the tax deductible
depreciation rate for buildings held by foreign investors
is 2% per annum. Also, the company can claim some of
the interest paid on shareholder loan accounts as an
expense.
Louis Group Property Association Benefits
• Louis Group's performance and track record;
• The opportunity for an investor to access this quality
deal via Louis Group;
• Louis Group's conservative investment philosophy, ie.
good location, covenant strength, strong economy;
• Joint investment with Louis Group;
• Leveraging on Louis Group's financial strength and
reputation;
• Low barriers to investment entry;
• Greater liquidity than other private property alternatives;
• Offshore holding platform;
• Louis Group's hands-on management style.
Private Placement Memorandum Six German Retail Properties
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investment risks
Potential shareholders should be aware of the risks of
investing in the Company and the property described
herein.
Value
The value of the investment may go down as well as up,
and the investor may not get back the full amount invested.
Over the medium to long-term the value of the property
will be affected (either positively or negatively) by changes
in a myriad of socio-economic factors, eg. government
policy, taxation, infrastructure development, GDP, inflation
and borrowing rates, and so forth.
In the short to medium-term however, value is driven
primarily by existing leases and it is most unlikely that
all tenants would default simultaneously.
Business Risks
The investment will be subject to the usual risks of owning
commercial property in Germany, including general
economic conditions, uninsured calamities and other
factors.
The Future
Historical facts, information gained from historic
experiences, present facts, circumstances and information,
and assumptions, from all or any of these, do not guide
the future. Aims, targets, plans, intentions and projections
referred to are no more than that and do not imply a
forecast. Past performance is not necessarily a guide to
future performance.
lliquidity
The market for investments in private property syndications
such as this is illiquid and there is no certainty that a
buyer will be available or that a particular price will be
obtained. There is no established market for interests in
the company.
Investments in the company will not be quoted or listed
on any investment exchange. It may be difficult to obtain
reliable information on the current value of the property.
An application for shares in the company may not be
cancelled.
properties germany
Leverage
There are risks associated with using bank lending which
include the risk of a forced property sale if default occurs,
leverage can augment potential losses, debt ranks ahead
of the investors' capital and loan injections and the interest
rate may not be fixed.
Investment Advice
The information on this memorandum is directed at
professional persons and is not to be regarded as an offer
to buy or sell, or the solicitation of any offer to buy or sell
securities or investments in any jurisdiction. Investors
will have to undertake due diligence procedures and
accept standard terms of business.
Note that this is not a "Collective Investment Scheme"
within the definitions contained in Section 30 of the Isle
of Man Financial Supervision Act 1988. The company is
a Closed Ended Company and is unregulated.
An investment in the company should be viewed as a
long term commitment, at least 7 years. Investors should
seek the advice of their own investment adviser before
considering investing in the company.
Other Risk Factors
The good location and physical characteristics of the
buildings may change over the investment period. The
credit-worthiness of the tenant may also change.
Yields may rise and property prices consequently fall. The
property market is cyclical and may be affected by oversupply
or decreased demand.
Disclaimers
The investor is advised to refer to the disclaimers described
herein.
Private Placement Memorandum Six German Retail Properties
19

investment structure
properties germany
Property Company
The properties were purchased by the following Isle of Man companies (hereinafter collectively referred to as the
"Property Companies"):
Berlin - Louis Group Properties GR15 Limited (Reg. No. 117818C)
Braunfels - Louis Group Properties GR12 Limited (Reg. No. 00527V)
Ellwangen - Louis Group Properties Pink Limited (Reg. No. 00218V)
Lorrach - Louis Group Properties GR12 Limited (Reg. No. 00527V)
Radolfzell - Louis Group Properties GR12 Limited (Reg. No. 00527V)
Stockach - Louis Group Properties GR11 Limited (Reg. No. 00528V)
The Holding Company, the Investment Company as well as each of the Property Companies have the same two Directors,
namely Lukas Nakos [B.Bus.SCI] and Lynn Keig [MBA FCIS FCMI FICA], or nominees appointed from time to time
by Louis Group (IOM) Limited. The Directors are experienced and approved Directors.
Each Property Company is wholly owned by Louis Group Investments Pink Limited (an Isle of Man company with Reg.
No. 00215V) hereinafter referred to as the "Holding Company." The Holding Company has the same Directors as the
property company. The Holding Company will be controlled by Louis Group InvestCo Pink Limited (an Isle of Man
company with Reg. No. 00584V) hereinafter referred to as the "Investment Company." Investors will acquire their
shares in the investment company.
Classes of Shares
The Investment Company will issue 2 classes of shares, namely Ordinary A class shares and Ordinary B class shares.
The Ordinary A Class shareholders have no voting rights, but they enjoy all the economic rights, namely rights to
participate in distributions of income or capital. The Ordinary B Class shareholders have all the voting rights, but they
do not enjoy any economic rights.
The Ordinary A Class shareholders will consist of the investors and the Ordinary B Class shareholders will be Louis
Group International Nominees (One) Limited or their appointees. Take note that this structure may change in line
with Directors decisions to save money and maximize investor objectives.
Loan Accounts
The Investment Company will be capitalized with shareholder loans. Each shareholder will be obliged to make an
interest free loan to the company in the amount of €9,999 per share acquired. These loans may earn interest at the
discretion of the Directors. Shareholder loans will be treated equally.
Louis Group International Holdings Ltd or its subsidiary company/ies and/or associated companies and/or Trusts and/or
Foundations ("Louis Group") will also be investing in this venture and providing its pro-rata portion of shareholder
loans. Since Louis Group facilitated the acquisition of this deal and made the necessary leverage arrangements with
the banks, Louis Group may redeem its credit loan from surplus funds available in the Investment Company before
investors are entitled to redeem their loans. Louis Group has made arrangements with the Investment Company that
in the unlikely event that any losses are suffered by shareholders, Louis Group will also suffer its pro-rata share of
such losses.
Organogram of Structure
All Investors A Class Shareholders B Class Shareholders LGI Nominees
Organogram of Structure
Louis Group Properties
GR11 Ltd
Louis Group Property
Stockach
Louis Group Properties
Pink Ltd
Louis Group Property
Ellwangen
Louis Group InvesCo Pink Ltd
Louis Group Investments Pink Ltd
* Note: This structure may be altered to maximise investor objectives.
Louis Group Properties
GR12 Ltd
Louis Group Property
Randolfzell, Lorrach, Braunfels
Louis Group Properties
GR15 Ltd
Plus Property
Berlin
Private Placement Memorandum Six German Retail Properties
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administrative issues
Investment Cost Per Share
The investment cost per share will be €10,000 split as
a 1 payment for the Ordinary A class shares plus a
corresponding €9,999 loan account.
Payments after Due Date
Investors purchasing shares in the Investment Company
after 1 April 2007 will be charged interest at 6% per
annum from 1 April 2007 until date of receipt of the
investors' funds. Similarly, investors depositing funds for
the purchase of company shares before 1 April 2007 will
earn interest at the applicable deposit rates of the Royal
Bank of Scotland.
Financial Reports
The company will report to each of its shareholders in
the following ways:
• submitting a comprehensive Investment Report and
Asset Register for the period ending the 28th February
of each year; and
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• posting or displaying on the Louis Group website a
copy of the Company's Audited Annual Financial
Statements.
Shareholders Agreement
Investors who wish to become shareholders of the
Investment Company must make a private placement
application for shares in the Company. Each shareholder
will also be obliged to make a loan to the company as
outlined in the investment structure.
Private Placement Memorandum Six German Retail Properties
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disclaimer
Prerequisites
Please note that it is only possible to acquire shares in Louis Group
InvestCo Pink Ltd ("the Company") by personal invitation. Consequently,
investment in the company will be limited to those who receive this
Private Placement Memorandum.
An investment in the company should be viewed as a long term commitment
(at least 7 years). Our aim will be to generate returns in excess of 10%
per annum in Euros over this investment period. There are however no
guarantees in this regard.
Note that this is not a "Collective Investment Scheme" within the definitions
contained in Section 30 of the Isle of Man Financial Supervision Act
1988. The company is a Closed Ended Company. It should be noted that
the contributions of participants/investors and the profits or income out
of which payments may be made to them are not pooled. Investors in the
investment company will have the rights of shareholders in a private
company incorporated in the Isle of Man according to the Memorandum
& Articles of Association of the company.
Louis Group (IOM) Ltd or the duly appointed nominees of Louis Group
International Holdings Ltd ("LG") have been appointed as Corporate Service
Providers to the Company over the entire investment period. LG have also
been appointed over the entire investment period as Managing Agents to
the Property, and as Property Advisors to the Directors of the company.
The company has investigated the property described in this document
(the "Property") and has utilized LG and other consultants to evaluate the
Property. The information is being issued by the company and is provided
to a limited number of prospective investors solely for their use in
considering their investment in the property.
Whilst the company has made all reasonable efforts to ensure the accuracy
of the information provided to it and the projections based thereon, it
makes no representation or warranty, express or implied, as to the accuracy
or completeness of the information contained herein and expressly
disclaims any and all liability relating to or resulting from the use of such
information. In particular no representation or warranty is given as to the
achievement or reasonableness of any future projections, estimates or
statements about future prospects of the Property. Investors are advised
to obtain their own independent legal or investment advice with regards
to the proposed investment in the company.
Also note that the projected returns are quoted in Euros and no projection
is provided for returns in any other currency. No liability is accepted for
exchange rate fluctuations.
The taxation issues contained in this Memorandum are merely intended
as a guide as to some of the significant taxation factors affecting this
investment. It is not intended to be used for taxation advice and no
liability is accepted.
The information on this memorandum is directed at professional persons
and is not to be regarded as an offer to buy or sell, or the solicitation of
any offer to buy or sell securities or investments in any jurisdiction.
Investors will have to undertake due diligence procedures and accept
standard terms of business.
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Specifically, the investments described are not available for distribution
to or investment by US investors. The units/shares will not be registered
under the US Securities Act of 1933, as amended (the "Securities Act")
and, except in a transaction which does not violate the Securities Act or
any other applicable US securities laws (including without limitation any
applicable law of any of the States of the USA) may not be directly or
indirectly offered or sold in the USA or any of its territories or possessions
or areas subject to its jurisdiction or to or for the benefit of a US person.
Persons resident in territories other than the Isle of Man should consult
their professional advisers as to whether they require any governmental
or other consents or need to observe any formalities to enable them to
invest in the products described on this memorandum.
If you need more information about the investment with the company,
please contact us directly. Alternatively, if you wish to obtain personal
advice as to whether the products on this Memorandum are suitable for
your needs, you should consult an Independent Financial Adviser ("IFA").
LG may be approached directly for investment advice or for
recommendations regarding investments. LG is licensed to perform
Corporate Services and Investment Business by the Isle of Man Financial
Supervision Commission. The information on this memorandum is for
informative purposes only. Under no circumstances is the information to
be used or considered on as an offer to sell, or a solicitation of an offer
to buy, any security. Additional information is available upon request.
Where information has been obtained from outside sources, it is believed
to be reliable but is not represented to be accurate or complete. Past
performance is not necessarily a guide to the future. The value of an
investment and any income from it can go down as well as up and you
may not get back the amount originally invested. To the best of our
knowledge and belief (having taken all reasonable care to ensure that
such is the case) the information on this memorandum is in accordance
with the facts and does not omit anything likely to affect the import of
such information.
Data Protection / Privacy Policy Statements
The Company and LG treats the privacy of its investors very seriously.
Although the company maintains strict confidentiality, the legal duties
imposed by law to record and disclose information to the relevant authorities
are complied with. The company will accordingly not be liable for any
claims, which may be made in relation to disclosures in compliance with
these legal obligations.
You have the right to receive details of the personal information that we
maintain about you although we reserve the right to make a nominal
charge for this service. We will not disclose personal information to third
parties, unless we are obliged to disclose such information to a regulatory
authority who is legally empowered to require such information.
This memorandum is for the use of the persons to whom it is addressed
and the recipients of this memorandum agree that all of the information
contained herein is of a confidential nature. This memorandum must not
be copied, reproduced, distributed or passed to others at any time without
the prior written consent of the company.
Private Placement Memorandum Six German Retail Properties
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